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Corus Bank - The Final Chapter or the First Chapter?

My last report on Corus was kind of a quickie, so here's a bit more in depth story on what happened.

Yesterday, Corus Bank was closed by federal regulators; the final chapter in a book where everyone knew the ending. To most of us in Reno, prior to the construction of the Montage, Corus Bank was simply the lender behind L3 Development. The little-known bank did not receive much press in Reno at the time, other than it was the principle in the loan. However in other parts of the country, Corus was riding the wave of condo development hard since 2002, including 13 mortgages each over $100 million in Florida. I think the bank's strategy was to collect on the high interest rates condo loans yield, but they only yield a return when those loans are performing, meaning when condos are selling at prices above the developer's/lender's bottom line...the line that divides profit from loss. This worked for a while, and really beefed up Corus' assets.But when that wave eventually crashed ashore, it wasn't good for Corus. While we have one Corus condo project downtown largely empty at the moment, there are dozens in south Florida, and not just projects from Corus.

Corus was hit hard when the wave crashed. So was South Florida. Some of their South Florida projects include The Artecity Governor, a 202-unit project that has sold 41 units, the Infinity at Brickell, a 459-unit project that has sold 49 units, and Jade Ocean Condominiums,a 256-unit tower that has sold 26 units.

It wasn't ALL bad for Corus, some of their projects like Quantum on the Bay and Edge Condominiums, are nearly sold out. But it wasn't enough to save Corus from the sinking value of these projects, and condo sales were few and far between in Florida, Reno and Las Vegas, the areas Corus chose to invest in.

Now the government owns all these towers, including the Montage.

There are rumors that Related Group may be keen on acquiring Corus' Florida properties, but that's a rumor, and who knows if the interest extends to the Nevada and California properties (including Tanamara Condominiums here in Reno). Stephen M. Ross, a powerhouse who happens to own the Miami Dolphins, is CEO of the east coast company. Hence, his rumored interest in Corus' batch of Florida properties.

It makes me wonder who will end up owning the Montage, and what they will do with it. Perhaps whoever ends up owning it can buy it at such a low price from the FDIC, that pricing at the Montage could be lowered dramatically, filling the building up faster. Maybe they will have an entirely different plan. Or maybe it will endlessly be passed from one private equity firm to the next, never really gaining a focus or purpose and remaining in limbo for years to come, but I like to think positive, and doubt that would happen. I feel whoever acquires it would have at least some kind of passion to make the building profitable and fill it up with folks.

And whoever acquires it will have a significant impact on downtown Reno, for the better or worse.

Thoughts?

Comments:

Post your comments
Posted by: doofus - 9/12/2009 4:23:53 PM
I think this is great news for downtown Reno, though certainly less so for the 33 brave pioneers who have purchased units. Finally, the other 350 units will be filled at "market" prices, whether as rentals or purchases. That means hundreds of new residents patronizing downtown businesses and restaurants. By failing twice, the Montage will finally achieve its original intent.

Posted by: Cynthia - 9/13/2009 10:29:20 AM
I agree with Doofus. Now that someone can buy the whole Montage for less money, they will be able to offer pricing that people will buy for.

Posted by: Native - 9/13/2009 2:18:10 PM
Don't forget that Corus had lowered the pricing between 41-47% this spring, and sales were continuing on a monthly basis with some closings. If the pricing falls BELOW market value, it hurts those first residents substantially. What the property needs is stability of ownership - and as of now, that hasn't happened yet.

Posted by: new to reno - 9/13/2009 9:03:05 PM
What does happen to Tanamera resort after FDIC took over? I know that over 300 condos are sold since 2006. They have roughly 100 or so condos left. Barone group switched gears and let go of their contracted realty - Kearney Residential. They are trying to keep their sales in house. Any ideas?

Posted by: remano - 9/14/2009 11:23:33 AM
"Don't forget that Corus had lowered the pricing between 41-47% this spring, and sales were continuing on a monthly basis with some closings. If the pricing falls BELOW market value, it hurts those first residents ....." Maybe so, but if they're not trying to sell their unit it is only a paper loss. I think a full and vibrant Montage will respond more quickly and positively when the market turns around, so in the long run lower prices now will benefit even those who have already purchased. Just my opinion, of course.

Posted by: Steve Watts - 9/15/2009 7:07:34 AM
Right you are remano. The last Montage unit sold at $258 a square foot...it needs to be about half that. Sorry previous buyers, but that's the risk you take. The Montage will be a success, and downtown will really thrive when they pack the place with buyers. If they won't face reality on pricing, it'll stay a ghost town.

Posted by: Downtownjunkie - 9/22/2009 3:15:38 AM
I also agree that pricing the units more aggressively will ultimate yield the best result for all parties. What is that number? I dunno, maybe $150-175/SF.

Posted by: Lead from the Front - 9/22/2009 7:54:08 AM
Turn the Montage into a gaming property.

 

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